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An Economic Analysis of Interest Rate Swaps
Author(s) -
BICKSLER JAMES,
CHEN ANDREW H.
Publication year - 1986
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1986.tb04527.x
Subject(s) - interest rate swap , swap (finance) , interest rate derivative , interest rate , interest rate risk , economics , valuation (finance) , liability , actuarial science , financial economics , business , monetary economics , finance
ABSTRACT Interest rate swaps, a financial innovation in recent years, are based upon the principle of comparative advantage. An interest rate swap is a useful tool for active liability management and for hedging against interest rate risk. The purpose of this paper is to provide a simple economic analysis of interest rate swaps. Alternative uses of and the appropriate valuation procedure for interest rate swaps are described.